2021 (1) TMI 1211 - AT - Insolvency and Bankruptcy

Anti-competitive agreements - Predatory pricing - dominance of Ola in the relevant market of radio taxi services in Bengaluru and its consequent abuse within the provisions of section 4 of the Act - possibility of more than one dominant party in the relevant market - abuse of position of dominance and matter remanded back for investigation against Uber - HELD THAT - The below cost pricing by Ola was not predatory pricing with a view to dislodging any competitor from the market but towards establishing itself as an effective and reliable brand in the market and also opening up a latent market to its advantage through awareness generation about its brand and network/platform through promotional initiatives like discounts and incentives and attracting new customers and gaining riders confidence. As Ola started from a low market share of about 20% we cannot agree that it was at that initial time in a dominant position in the market and was trying to push out competitors from the market by employing below-cost predatory pricing. Increase in its market share over a period of time we feel was due to a combination of factors of which below cost pricing was one. Since this pricing strategy was combined with other actions like ease of booking using a smooth and functional technology platform accessible on mobile phones visible branding riders security benefits to drivers all of which were quite effective in earning the riders and drivers confidence Ola could become their radio taxi service of preference. The agreements that Ola has with drivers covers many aspects which concern welfare measures for drivers and helping them source credit for buying vehicles. It does stand guarantee for the loans thus there is no binding for the drivers to remain loyal to Ola because of financial lock-in. The incentives provided to drivers are dynamic and not constant in time. The drivers have the option to shift to other network depending on their requirement and convenience. Hence the driver s agreement that Ola has with drivers with entirely optional and does not in any way bind the drivers to Ola s network in any way. The option to move away from Ola s network is always there in case the drivers so want - there are no drivers agreements anti-competitive in violation of section 3 of the Act. Looking to the market behavior of Ola a clear view is derived that Ola was providing a mobile-app based solution to the riders and drivers in a new and easy way for taxi rides which includes taxi booking and payment. It was not enjoying a dominant position in the relevant market in violation of Section 4 of the Act as it was itself a new entrant in the market. It employed a pricing strategy to establish its brand and network to provide much more efficient and user-friendly services to customers in real time at any place and anytime to edge out the competitors who were already present in the radio taxi market in Bengaluru which cannot be faulted as being predatory pricing. Moreover since Ola is not in dominant position the question of abuse of dominant position through predatory pricing also does not get attracted - appeal dismissed.

Summary

Issues Involved:
1. Abuse of dominant position by Ola.
2. Anti-competitive agreements by Ola.
3. Predatory pricing by Ola.
4. Investigation period and market dynamics.
5. Reliefs sought by appellants.

Detailed Analysis:

1. Abuse of Dominant Position by Ola:
The appeals by Meru Travel Solutions Pvt. Ltd. and Fast Track Call Cab Pvt. Ltd. challenge the Competition Commission of India (CCI) order dated 19.7.2017, which found that Ola (operated by ANI Technologies Pvt. Ltd.) did not abuse its dominant position in the Bengaluru radio taxi market. The CCI concluded that Ola's dominance and abuse were not established based on the evidence and the Director General's (DG) investigation report. The appellants argued that Ola's rapid market growth, driven by substantial funding and aggressive pricing strategies, resulted in a dominant position and monopolistic practices. However, the tribunal found that Ola's market share increased due to its effective use of technology and promotional strategies, not dominance. The tribunal noted that Ola faced competition from established players like Meru and Fast Track and new entrants like Uber, which prevented it from acting independently of competitive forces.

2. Anti-competitive Agreements by Ola:
The appellants alleged that Ola's agreements with drivers were anti-competitive, violating Section 3 of the Competition Act. They pointed to clauses in the Master Services Agreement that penalized drivers for non-compliance, effectively tying them to Ola's platform. However, the tribunal found that these agreements included voluntary compliance standards and welfare measures for drivers, such as medical insurance, loans, and employment assistance. The tribunal concluded that these agreements did not bind drivers exclusively to Ola's network and did not constitute anti-competitive practices.

3. Predatory Pricing by Ola:
The appellants claimed that Ola engaged in predatory pricing by offering significant discounts to customers and incentives to drivers, resulting in substantial losses per trip. They argued that this strategy aimed to eliminate competitors and establish a monopoly. The tribunal examined Ola's pricing strategy and found that the discounts and incentives were part of a broader effort to establish its brand and expand the market. The tribunal noted that Ola's losses were temporary and linked to its promotional activities and market expansion, not predatory pricing. The presence of Uber, which also adopted similar pricing strategies, further indicated that Ola was responding to competitive market conditions rather than abusing a dominant position.

4. Investigation Period and Market Dynamics:
The appellants contended that the investigation period was unnecessarily extended and that the CCI should have considered separate timeframes for assessing Ola's market share and dominance. The tribunal upheld the CCI's decision to investigate the entire period up to September 2015, noting that market dynamics and the evolving competitive landscape justified the extended investigation. The tribunal emphasized that Ola's market behavior, including its use of technology and promotional strategies, contributed to its market growth and did not indicate an abuse of dominant position.

5. Reliefs Sought by Appellants:
The appellants sought to set aside the CCI's order, hold Ola guilty of violating Sections 3 and 4 of the Competition Act, and direct Ola to cease its anti-competitive practices. They also requested the tribunal to remand the matter for further investigation if more than one dominant party was found in the market. The tribunal dismissed the appeals, finding no merit in the allegations of abuse of dominant position, anti-competitive agreements, or predatory pricing. The tribunal concluded that Ola's market strategies were aimed at establishing its brand and expanding the market, not eliminating competitors through unfair practices.

Conclusion:
The tribunal dismissed the appeals, upholding the CCI's order that Ola did not abuse its dominant position or engage in anti-competitive agreements. The tribunal found that Ola's market behavior, including its use of technology and promotional strategies, contributed to its market growth without violating competition laws. The tribunal emphasized the importance of considering market dynamics and the evolving competitive landscape in assessing allegations of dominance and abuse.